Ford Motor Co. will more than double its capacity to build vehicles in Mexico over the next three years, falling in step with other American automakers as they shift production south of the U.S. border. The company plans to build a manufacturing plant and expand an existing site, the Wall Street Journal reported based on word from people familiar with the matter.
The company will construct the new $1.5 billion plant in San Luis Potosi in central Mexico, Reuters reported citing anonymous sources. It will also add capacity at a facility near Mexico City.
The investments could create additional production capacity of up to 500,000 new units per year in Mexico for the company in 2018. That’s more than double the 433,000 vehicles it produced there in 2014. The Journal reported at least part of the new capacity will likely be used for a hybrid vehicle that the company has yet to announce. A replacement or upgrade for the compact Ford Focus, expected in 2018, will also be made in Mexico, reported Bloomberg.
Ford isn’t the only auto company to look south for future growth. General Motors Co. said it would sink $5 billion into adding production capacity and creating a total of 5,600 jobs across four sites in Mexico over six years starting in 2013, reported the Detroit News.
Ford’s decision follows a recent labor agreement with the United Auto Workers (UAW) that pushed wages for American employees higher. Those gains were echoed in deals the union struck with other automakers in the industry. In Ford’s case, a new four-year labor contract settled in November grants an hourly wage of nearly $30 to workers and a one-time ratification bonus of $8,500 to all employees, according to the trade publication Industry Week.
Earlier this week, UAW President Dennis Williams said there was no financial reason for U.S. automakers to invest further in factories and jobs in Mexico because “they’re making profits right here in the United States,” Bloomberg reported.